CONTRACTOR FAIR DEAL
Don't let the new IR35 proposals ruin your livelihood!!
Act now while you still have the chance!
Here's their intentions.....
....and it doesn't read well!
What's the problem then?

In 2017, the government plans to impose draconian new tax rules for contract workers who operate via Limited Companies where the company’s end client is a public sector body.  These measures were first mentioned in a budget speech by the then Chancellor of the Exchequer, George Osborne, who said the measures were intended to ‘level the playing field’ by taxing virtually all those who work via a Limited Company in the same way as those in full time staff positions.

Fair enough?

Sounds fair doesn’t it?  Well, not really.  Because, whether by accident or design, the government has failed to acknowledge that the rights and working patterns of a contract worker are fundamentally different to those of a full-time member of staff.  In addition, a number of naïve assumptions have been made about the way the bodies or companies employing contractors will react to, and implement, the legislation.
The proposals

Like any government legislation, the new proposals are complex with numerous grey areas but, in a nutshell, what they say are:

If you’re working through your own Limited Company (referred to as a Personal Service Company or PSC in the proposals) and your ultimate client is a public sector body, then the agency or company that pays your invoice (referred to as “the Engager”) must deduct full Income Tax and National Insurance as though you were a member of staff before settling the bill.  The government says the public-sector body will cough up for the Employer’s National Insurance, but I’m certain that won’t happen.  More about that later.

The new proposals won’t yet apply to the private sector but you can’t necessarily take any solace from that.  For a start there are an astounding number of public sector bodies referenced in the proposals (I stopped counting at 600), many of whom I had no idea were public sector (Channel 4 for instance) so it may be that your ultimate paymaster is a public body and you didn’t even realise it.  In any case the government is bound to extend the legislation, if approved, to the private sector sooner or later, despite claims otherwise.

As though it was a big deal, the proposals initially harped on about allowing a 5% deduction prior to tax as an administration fee but HMRC admitted themselves that they didn't know how it would work.  My opinion was that this wouldn’t benefit the contractor in any way but would have just reduced our income even further as it would likely go to the engager as an administration fee.  My opinion is now irrelevant as the Autumn statement quietly announced that the idea had been scrapped anyway.  So that's even more unfair tax and NI to pay.
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